Although the global market system generates enormous benefit to the world population

The benefits of growth will not be evenly spread across countries or within countries
and
collateral damage to the environment will be significant .
Scarce resources will be consumed, and the worlds climate will continue to change.
How should we view these challenges?
an they be dealt with through standard operating procedures, or
do they represent potentially ma!or threats to continued global growth or even to market
capitalism itself?
A longside the issue of climate change, globalization and poverty epitomize two of the most
pressing international development issues today. Despite the enormous potential of globalization
in accelerating economic growth and development through greater integration into the world
economy, the spread and transfer of technology, and the transmission of knowledge, its impact
on poverty reduction has been uneven and even marginal in some regions such as in much of
sub-aharan Africa !A". #oth the prevalence and depth of poverty in many parts of the
developing world remain unacceptably high.
$he fear that the poor have been bypassed, or actually hurt, by globalization was highlighted by
the findings from a number of recent studies, which point towards a continuing prevalence of
high ine%uality in world income distribution and limited if not a lack of income convergence
among participating national economies and across regions !&issanke'$horbecke, ())*". $he
regional trends in income ine%uality measured by the +ini coefficient show that within country
ine%uality has increased markedly since the early ,-.)s in all regions e/cept in the group
consisting of the advanced high income, the 0rganisation for 1conomic 2o-operation and
Development !012D" countries.!3ilanovic, ())4a, ())4b5 #irdsall, ())*". 6ithin high income
countries too, there are many that e/perienced growing ine%uality.
Despite some improvements in aggregate measures of integration intensity, A presents a clear
e/ample in support of the argument that the shift to an open policy regime alone is not sufficient
to bring about economic growth and conse%uent poverty reduction!7osu'3old, ()).".After two
decades of reforms dominated by liberalization, privatization and deregulation, the economies of
A have not yet been able to escape from the growth tragedy syndrome8the term popularly
used in characterizing the regions dismal economic performance in the comparative growth
literature.
$he failure of A economies to diversify and undergo structural transformation, and hence, to
benefit from the technology driven, highly dynamic aspects of the on-going globalization process
has led to ma9or drawbacks in terms of low economic growth and persistent poverty. $he
incidence and depth of poverty has deepened in the region. According to estimates provided by
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2hen and :avallion !());", the number of poor below the <=, a day international poverty line
almost doubled in A from about ,*; million in ,-., to >,> million in ()),. $he poverty
incidence !the headcount ratio" in A reached ;* per cent in ()),8the highest of the ma9or
regions in the world. Ali and $horbecke !()))" argue that poverty in A is both most prevalent
and severe in rural areas.
2learly, a strategic position towards globalization cannot be e%uated with a mere adoption of
liberal trade and investment regimes, or a simple fine-tuning of the pace and se%uence of
liberalization measures. At the sametime, there is no place for an old style, poorly designed and
implemented protection policy, which is mired inunproductive rent seeking activities, patron-
client relationships between governments and private agents or consolidation of vested interests
of the protected sectors. ?mport substitution strategy can work only when protection is granted to
firms with a clearly specified graduation clauseina performance based system. $hat is,
protection should always be seen as temporary and @time-bound by agents in return for better
performances.
+enerally, given the observed trends towards ine%uality both globally and within many nations,
developing countries have to take strategic steps to position themselves more favourably in the
globalization process, in order to derive greater benefits from globalizations dynamic forces.
$hey need a long term vision for upgrading their comparative advantages towards high value
added activities by climbing the technology ladder step-by-step through learning and adaptation.
$o succeed, developing country governments should consciously engage in building institutional
capacities for integration, including a capable nation state that is ready to take on the enormous
challenges posed by globalization. $he positive benefits from globalization are neither automatic
nor guaranteed, whilst passive liberalization would risk perpetual marginalization.
7urthermore, since openness could potentially benefit the poor in countries which have already
reached the take-off stage, it is very critical that in addition to a long term vision for strategic
integration, low income countries should embark on the path towards structural transformation of
their agrarian economies, as a necessary condition for successful integration. $he importance of
this critical step in relation to the globalizationApoverty ne/us is underscored by the fact that
there are critical thresholds that need to be reached before the positive effects of globalization on
poverty reduction can be realized. $he non-linear Baffer-type relationship between globalization
and poverty shows that openness helps those with basic and higher education, but reduces the
income share of those with no or little education and it is only when basic education becomes the
norm for the poor that openness e/ert an income e%ualizing effect !3ilanovic, ())(".$hus, at
low income levels, openness affects e%uality negatively, while at medium and high income level
it could potentially promote e%uality.
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